Highlights of the fiscal year include:
  • Revenue of $178.4 million, an increase of 41% compared to FY16.
  • Net income of $26.4 million, an increase of 59% compared to FY16.
  • Net income per diluted share of $0.44 compared to $0.28 in FY16.
  • Adjusted EBITDA of $62.8 million, an increase of 55% compared to FY16.
  • HSA Members of 2.7 million, an increase of 28% compared to FY16.
  • Total Custodial Assets of $5.0 billion, an increase of 37% compared to FY16.

Highlights of the fourth quarter include:
  • Revenue of $46.8 million, an increase of 30% compared to Q4 FY16.
  • Net income of $4.1 million, an increase of 30% compared to Q4 FY16.
  • Net income per diluted share of $0.07 compared to $0.05 in Q4 FY16.
  • Adjusted EBITDA of $11.8 million, an increase of 33% compared to Q4 FY16.

DRAPER, Utah, March 21, 2017 (GLOBE NEWSWIRE) -- HealthEquity, Inc. (NASDAQ:HQY) ("HealthEquity" or the "Company"), the nation's largest health savings account ("HSA") non-bank custodian, today announced financial results for its fourth quarter and year ended January 31, 2017.

"HealthEquity had another record setting year in fiscal year 2017 surpassing $5 billion in custodial assets and opening a record 668,000 new HSAs," said Jon Kessler, President and CEO of HealthEquity. "Our 37% growth of custodial assets and 28% growth of HSAs led to greater market share and generated year-over-year revenue growth of 41% and Adjusted EBITDA growth of 55%. Adjusted EBITDA margins reached a record 35% of revenue as we continue to scale our proprietary platform and unique healthcare ecosystem. Building on our successful fiscal 2017, we are poised for another strong growth year in fiscal 2018."

Dr. Steve Neeleman, Vice Chairman and Founder of HealthEquity, added, "With our commitment to remarkable 'purple' service combined with favorable tailwinds politically, and economically, and general market tides favoring HSAs, we are well-positioned to continue our efforts to outpace the market in helping build health savings for our members and driving down healthcare cost growth for our Network Partners."

Full year financial results

For the year ended January 31, 2017, HealthEquity reported revenue of $178.4 million, an increase of 41% compared to $126.8 million for the year ended January 31, 2016. Revenue consisted of:
  • Service revenue of $77.3 million, an increase of 25% compared to FY16.
  • Custodial revenue of $59.6 million, an increase of 58% compared to FY16. 
  • Interchange revenue of $41.5 million, an increase of 51% compared to FY16.

Net income was $26.4 million for the year ended January 31, 2017, compared to $16.6 million for the year ended January 31, 2016.

Net income per diluted share was $0.44 for the year ended January 31, 2017, compared to $0.28 for the year ended January 31, 2016.

Non-GAAP Adjusted EBITDA was $62.8 million for the year ended January 31, 2017, an increase of 55% compared to $40.6 million for the year ended January 31, 2016. Adjusted EBITDA was 35% of revenue for the year ended January 31, 2017, compared to 32% for the year ended January 31, 2016.

As of January 31, 2017, we had $180.4 million of cash, cash equivalents and marketable securities and no outstanding debt. This compares to $123.8 million in cash, cash equivalents and marketable securities and no outstanding debt as of January 31, 2016.

Fourth quarter financial results

For the fourth quarter ended January 31, 2017, HealthEquity reported revenue of $46.8 million, an increase of 30% compared to $35.9 million for the fourth quarter ended January 31, 2016. Revenue consisted of:
  • Service revenue of $20.6 million, an increase of 21% compared to Q4 FY16.
  • Custodial revenue of $16.0 million, an increase of 44% compared to Q4 FY16. 
  • Interchange revenue of $10.1 million, an increase of 33% compared to Q4 FY16.

Net income was $4.1 million for the fourth quarter ended January 31, 2017, compared to $3.1 million for the fourth quarter ended January 31, 2016.

Net income per diluted share was $0.07 for the fourth quarter ended January 31, 2017, compared to $0.05 for the fourth quarter ended January 31, 2016.

Non-GAAP Adjusted EBITDA was $11.8 million for the fourth quarter ended January 31, 2017, an increase of 33% compared to $8.9 million for the fourth quarter ended January 31, 2016.

HSA Member and Custodial asset metrics

The total number of HSAs for which we serve as a non-bank custodian ("HSA Members") as of January 31, 2017 was 2.7 million, an increase of 28% from 2.1 million as of January 31, 2016.

Total Custodial Assets as of January 31, 2017 was $5.0 billion, an increase of 37% year over year, consisting of:
  • Custodial Cash Assets of $4.4 billion, an increase of 34% compared to Q4 FY16; and
  • Custodial Investment Assets of $658.6 million, an increase of 62% compared to Q4 FY16.

Business outlook

For the year ended January 31, 2018, we expect our revenue to be between $220.0 million and $225.0 million. Our outlook for net income is a range of $30.0 million to $34.0 million, resulting in a net income per diluted share range of $0.50 to $0.55 (based on an estimated 61.5 million weighted-average shares outstanding). Our Adjusted EBITDA outlook is a range of $77.0 million to $82.0 million. The business outlook for the year ended January 31, 2018 assumes a projected effective income tax rate of approximately 37%.

A reconciliation of the non-GAAP financial measure used throughout this release to the most comparable GAAP financial measure is included with the financial tables at the end of this release.

Conference call

HealthEquity management will host a conference call at 5:00 pm (Eastern Time) on Tuesday, March 21, 2017 to discuss the fiscal year 2017 fourth quarter and full year financial results. The conference call will be accessible by dialing 884-791-6252, or 661-378-9636 for international callers, and referencing conference ID 79091036. A live audio webcast of the call will also be available on the investor relations section of our website at http://ir.healthequity.com.

Non-GAAP financial Information

To supplement our financial information presented on a GAAP basis, we disclose Adjusted EBITDA, which is a non-GAAP financial measure. We define Adjusted EBITDA as adjusted earnings before interest, taxes, depreciation and amortization, stock-based compensation expense, and other certain non-operating items.

Non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute for, or superior to, GAAP results. The Company cautions investors that non-GAAP financial information, by its nature, departs from GAAP; accordingly, its use can make it difficult to compare current results with results from other reporting periods and with the results of other companies. Whenever we use these non-GAAP financial measures, we provide a reconciliation of the applicable non-GAAP financial measure to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measure as detailed in the tables below.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding the company's industry, business strategy, plans, goals and expectations concerning our market position, product expansion, future operations, revenue, margins, profitability, future efficiencies, capital expenditures, liquidity and capital resources and other financial and operating information. When used in this discussion, the words "may," "believes," "intends," "seeks," "anticipates," "plans," "estimates," "expects," "should," "assumes," "continues," "could," "will," "future" and the negative of these or similar terms and phrases are intended to identify forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond the control of the company. The company's actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to, the continued availability of tax-advantaged consumer-directed benefits to employers and employees, the company's ability to acquire and retain new network partners and to cross-sell its products to existing network partners and members, the company's ability to successfully identify, acquire and integrate portfolio purchases or acquisition targets, the company's ability to raise awareness among employers and employees about the advantages of adopting and participating in consumer-directed benefits programs, and the company's ability to identify and execute on network partner opportunities. For a detailed discussion of these and other risk factors, please refer to the risks detailed in the company's filings with the Securities and Exchange Commission, including, without limitation, our most recent Annual Report on Form 10-K and subsequent periodic and current reports. Past performance is not necessarily indicative of future results. The company undertakes no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These forward-looking statements should not be relied upon as representing the company's views as of any date subsequent to the date of this press release.
 
HealthEquity, Inc. and its subsidiaries
Consolidated balance sheets (unaudited)
 
(in thousands, except par value) January 31, 2017     January 31, 2016  
Assets      
Current assets      
Cash and cash equivalents $ 139,954     $ 83,641  
Marketable securities, at fair value 40,405     40,134  
Total cash, cash equivalents and marketable securities 180,359     123,775  
Accounts receivable, net of allowance for doubtful accounts of $75 and $40 as of January 31, 2017 and 2016, respectively 17,001     14,308  
Inventories 592     620  
Current deferred tax asset     2,642  
Other current assets 2,867     1,703  
Total current assets 200,819     143,048  
Property and equipment, net 5,170     3,506  
Intangible assets, net 65,020     66,840  
Goodwill 4,651     4,651  
Deferred tax asset 1,615      
Other assets 1,861     1,750  
Total assets $ 279,136     $ 219,795  
Liabilities and stockholders' equity      
Current liabilities      
Accounts payable $ 3,221     $ 2,431  
Accrued compensation 8,722     7,776  
Accrued liabilities 3,760     1,899  
Total current liabilities 15,703     12,106  
Long-term liabilities      
Other long-term liabilities 1,456     236  
Deferred tax liability 37     3,996  
Total long-term liabilities 1,493     4,232  
Total liabilities 17,196     16,338  
Commitments and contingencies      
Stockholders' equity      
Preferred stock, $0.0001 par value, 100,000 shares authorized, no shares issued and outstanding as of January 31, 2017 and 2016      
Common stock, $0.0001 par value, 900,000 shares authorized, 59,538 and 57,726 shares issued and outstanding as of January 31, 2017 and 2016, respectively 6     6  
Additional paid-in capital 232,114     199,940  
Accumulated other comprehensive loss, net (165 )   (98 )
Accumulated earnings 29,985     3,609  
Total stockholders' equity 261,940     203,457  
Total liabilities and stockholders' equity $ 279,136     $ 219,795  

HealthEquity, Inc. and its subsidiaries
Consolidated statements of operations and comprehensive income (unaudited)
       
  Three months ended January 31,     Year ended January 31,  
(in thousands, except per share data) 2017     2016     2017     2016  
Revenue              
  Service revenue $ 20,644     $ 17,101     $ 77,254     $ 61,608  
  Custodial revenue 16,036     11,163     59,593     37,755  
  Interchange revenue 10,134     7,622     41,523     27,423  
  Total revenue 46,814     35,886     178,370     126,786  
 Cost of revenue              
  Service costs 17,397     13,256     51,868     39,418  
  Custodial costs 2,556     2,051     9,767     6,522  
  Interchange costs 2,632     2,148     10,380     8,248  
  Total cost of revenue 22,585     17,455     72,015     54,188  
 Gross profit 24,229     18,431     106,355     72,598  
 Operating expenses              
  Sales and marketing 5,556     4,665     18,320     13,302  
  Technology and development 6,548     4,891     22,375     16,832  
  General and administrative 4,861     3,535     20,151     14,113  
  Amortization of acquired intangible assets 1,083     981     4,297     2,208  
  Total operating expenses 18,048     14,072     65,143     46,455  
 Income from operations 6,181     4,359     41,212     26,143  
 Other expense              
  Other expense, net (158 )   (63 )   (1,092 )   (589 )
 Total other expense (158 )   (63 )   (1,092 )   (589 )
 Income before income taxes 6,023     4,296     40,120     25,554  
 Income tax provision 1,961     1,168     13,744     8,941  
 Net income $ 4,062     $ 3,128     $ 26,376     $ 16,613  
Net income attributable to common stockholders:              
 Basic $ 4,062     $ 3,128     $ 26,376     $ 16,613  
 Diluted $ 4,062     $ 3,128     $ 26,376     $ 16,613  
Net income per share attributable to common stockholders:              
 Basic $ 0.07     $ 0.05     $ 0.45     $ 0.29  
 Diluted $ 0.07     $ 0.05     $ 0.44     $ 0.28  
Weighted-average number of shares used in computing net income per share attributable to common stockholders:              
 Basic 59,438     57,673     58,615     56,719  
 Diluted 60,645     59,420     59,894     58,863  
Comprehensive income:              
Net income 4,062     3,128     26,376     16,613  
Other comprehensive loss:              
Unrealized loss on available-for-sale marketable securities, net of tax (31 )   (64 )   (67 )   (98 )
Comprehensive income $ 4,031     $ 3,064     $ 26,309     $ 16,515  

HealthEquity, Inc. and its subsidiaries
Consolidated statements of redeemable convertible preferred stock and stockholders' equity (deficit) (unaudited)
 
      Stockholders' equity (deficit)  
  Redeemable convertible preferred stock   Convertible preferred stock   Common stock   Common   Additional   Accumu- lated compre-   Accumu- lated    Total stock- holders'  
(in thousands, except exercise prices) Shares   Amount   Shares   Amount   Shares   Amount   stock warrants   paid-in capital   hensive loss   earnings(deficit)   equity (deficit)  
Balance as of January 31, 2014 17,349   $ 46,714   6,156   $ 8,129   7,038   $ 1   $ 2,334   $   $   $ (23,170 ) $ (12,706 )
Issuance of series D-3 redeemable convertible preferred stock cash dividend               (347 )     (347 )
Issuance of common stock cash dividend               (50,000 )     (50,000 )
Issuance of common stock:                      
Exercise of 2,972 warrants at $0.8008 per share         2,972     (2,334 ) 4,714       2,380  
Exercise of 1,841 options at $1.3204 per share         1,841       2,430       2,430  
Conversion of preferred stock to common stock upon initial public offering (17,349 ) (42,693 ) (6,156 ) (8,129 ) 32,486   3     50,819       42,693  
Issuance of common stock         10,465   1     132,586       132,587  
Stock-based compensation               2,525       2,525  
Tax benefit on stock options exercised               3,429       3,429  
Redeemable convertible preferred stock accretion   (4,021 )           4,021       4,021  
Reclassification of series D-3 redeemable convertible preferred stock derivative liability               6,917       6,917  
Net income                   10,166   10,166  
Balance as of January 31, 2015   $     $   54,802   $ 5   $   $ 157,094   $   $ (13,004 ) $ 144,095  
Issuance of common stock:                      
Exercise of 1,951 options at $0.98 per share         1,951   1     1,914       1,915  
Issuance of common stock         973       23,492       23,492  
Stock-based compensation               5,883       5,883  
Tax benefit on stock options exercised               11,557       11,557  
Other comprehensive loss, net of tax                 (98 )   (98 )
Net income                   16,613   16,613  
Balance as of January 31, 2016   $     $   57,726   $ 6   $   $ 199,940   $ (98 ) $ 3,609   $ 203,457  
Issuance of common stock:                      
Issuance of common stock upon exercise of options, and for restricted stock units         1,812       7,142       7,142  
Stock-based compensation               8,398       8,398  
Tax benefit on stock options exercised               16,634       16,634  
Other comprehensive loss, net of tax                 (67 )   (67 )
Net income                   26,376   26,376  
Balance as of January 31, 2017   $     $   59,538   $ 6   $   $ 232,114   $ (165 ) $ 29,985   $ 261,940  

HealthEquity, Inc. and its subsidiaries
Consolidated statements of cash flows (unaudited)
 
  Year ended January 31,  
(in thousands) 2017     2016     2015  
Cash flows from operating activities:          
Net income $ 26,376     $ 16,613     $ 10,166  
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization 13,186     8,601     5,890  
Deferred taxes (2,891 )   (2,178 )   1,593  
Stock-based compensation 8,398     5,883     2,525  
Loss on revaluation of redeemable convertible preferred stock derivative         735  
Loss on other investments         24  
Bad debt expense 35     24     31  
Amortization of deferred financing costs 68     23      
Changes in operating assets and liabilities:          
Accounts receivable (2,728 )   (5,174 )   (3,380 )
Inventories 28     5     (234 )
Other assets (1,343 )   (107 )   (1,608 )
Accounts payable 567     1,011     (1,156 )
Accrued compensation 946     2,475     1,167  
Accrued liabilities 1,729     (383 )   (802 )
Other long-term liabilities 1,220     (252 )   95  
Net cash provided by operating activities 45,591     26,541     15,046  
Cash flows from investing activities:          
Purchase of marketable securities (379 )   (40,291 )    
Purchase of property and equipment (3,645 )   (2,376 )   (1,712 )
Purchase of software and capitalized software development costs (9,030 )   (6,896 )   (6,420 )
Purchase of other investments     (500 )   (305 )
Acquisition of intangible member assets     (40,489 )    
Net cash used in investing activities (13,054 )   (90,552 )   (8,437 )
Cash flows from financing activities:          
Dividend payments         (50,347 )
Proceeds from initial public offering, net of payments for offering costs         132,587  
Proceeds from follow-on offering, net of payments for offering costs     23,492      
Proceeds from exercise of common stock options 7,142     1,915     2,430  
Proceeds from exercise of common stock warrants         2,380  
Tax benefit from exercise of common stock options 16,634     11,557     3,429  
Deferred financing costs paid     (317 )    
Net cash provided by financing activities 23,776     36,647     90,479  
Increase (decrease) in cash and cash equivalents 56,313     (27,364 )   97,088  
Beginning cash and cash equivalents 83,641     111,005     13,917  
Ending cash and cash equivalents $ 139,954     $ 83,641     $ 111,005  
                       

Stock-based compensation expense (unaudited)

Total stock-based compensation expense included in the consolidated statements of operations and comprehensive income is as follows:
  Three months ended January 31,     Year ended January 31,  
(in thousands) 2017     2016     2017     2016  
Cost of revenue $ 522     $ 348     $ 1,780     $ 1,088  
Sales and marketing (16 )   198     914     903  
Technology and development 613     336     1,903     1,014  
General and administrative 880     747     3,801     2,878  
Total stock-based compensation expense $ 1,999     $ 1,629     $ 8,398     $ 5,883  
                               

HSA Members (unaudited)
                      % change from     % change from  
    January 31, 2017     January 31, 2016     January 31, 2015     2016 to 2017     2015 to 2016  
HSA Members   2,746,132     2,140,631     1,426,785     28%     50%  
Average HSA Members - Year-to-date   2,339,091     1,600,327     1,087,962     46%     47%  
Average HSA Members - Quarter-to-date   2,519,382     1,850,843     1,230,256     36%     50%  
HSAs with investments   65,906     44,680     30,552     48%     46%  
                               

Custodial assets (unaudited)
                          % change from     % change from  
(in thousands, except percentages) January 31, 2017     January 31, 2016     January 31, 2015     2016 to 2017     2015 to 2016  
Custodial cash $ 4,380,487     $ 3,278,628     $ 2,075,741     34%     58%  
Custodial investments 658,580     405,878     286,526     62%     42%  
Total custodial assets $ 5,039,067     $ 3,684,506     $ 2,362,267     37%     56%  
Average daily custodial cash - Year-to-date $ 3,661,058     $ 2,326,506     $ 1,553,845     57%     50%  
Average daily custodial cash - Quarter-to-date $ 3,854,518     $ 2,682,827     $ 1,698,402     44%     58%  
                                   

Net income reconciliation to Adjusted EBITDA (unaudited)
  Three months ended January 31,     Year ended January 31,  
(in thousands) 2017     2016     2017     2016  
Net income $ 4,062     $ 3,128     $ 26,376     $ 16,613  
Interest income (146 )   (112 )   (531 )   (414 )
Interest expense 69     68     275     91  
Income tax provision 1,961     1,168     13,744     8,941  
Depreciation and amortization 2,559     1,890     8,889     6,393  
Amortization of acquired intangible assets 1,083     981     4,297     2,208  
Stock-based compensation expense 1,999     1,629     8,398     5,883  
Other (1) 236     106     1,348     910  
Adjusted EBITDA $ 11,823     $ 8,858     $ 62,796     $ 40,625  

(1) For the three months ended January 31, 2017 and 2016, Other consisted of non-income based taxes of $101 and $85, and other costs of $135 and $21, respectively. For the years ended January 31, 2017 and 2016, Other consisted of miscellaneous taxes of $358 and $334, acquisition-related costs of $631 and $471, and other costs of $359 and $105, respectively.

Reconciliation of net income outlook to Adjusted EBITDA outlook
  For the year ending
(in millions) January 31, 2018
Net income $30 - 34
Income tax provision 18 - 19
Depreciation and amortization ~ 12
Amortization of acquired intangible assets ~ 4
Stock-based compensation expense ~ 12
Other ~ 1
Adjusted EBITDA $77 - 82

 
Investor Relations Contact:Richard Putnam801-727-1209rputnam@healthequity.com

Primary Logo